7. Marketing Programs and Tactics

In this section we address several Pacific Bell marketing programs and tactics that are not directed at a specific service. "Offer on every call" refers to Pacific Bell's requirement that its service representatives offer customers additional services on every incoming call to Pacific Bell. Sequential offering is Pacific Bell's policy of ordering service representatives to offer more expensive packages of services first and less expensive packages upon refusal of the larger one. Incentives and targets refer to sales incentive programs for service representatives with specific sales goals. In the last part of this section, we address Pacific Bell's policy of releasing customer information to its affiliates and agents.

7.1. "Offer on Every Call"

In 1997, Pacific Bell instituted a policy of offering optional services, such as Call Waiting and Caller ID, every time a customer calls Pacific Bell, regardless of the customer's purposes in calling. Pacific Bell implemented this "Offer on Every Call" policy by requiring its service representatives to offer optional services on every incoming call from a customer, unless a customer is requesting disconnection or has been disconnected for non-payment. Service representatives may offer optional services in response to a customer's stated or implied needs, but are encouraged to offer services based simply on current sales promotions. (Testimony of Michael Shames, p. 35, and Attachments MS-19 and MS-82 through 85.) Pacific Bell trained its service representatives to "overcome" customers' objections to ordering specific services or packages. (Testimony of Michael Shames, p. 36, and Attachment MS-87.) Sales by service representatives who offer optional services to customers when they call Pacific Bell is Pacific Bell's primary means of selling optional services. (Joint Stipulation of Undisputed Facts, No. 24.)

UCAN and ORA contend that this "Offer on Every Call" policy (especially in combination with the Pacific Bell's practice of offering most expensive options first, discussed in the following section) elevates sales over service, and interferes with the delivery of customer service of a reasonable quality, in the following ways: it interferes with customers obtaining the information or service they called to request, and to which they are entitled; some sales pitches are misleading in that they create the unfounded impression that additional services are being offered based on an analysis of the particular customer's calling patterns; customers, including low-income customers and even customers eligible for Lifeline Service, are sometimes pressured to accept services they may not want and may not be able to afford; and it slows Pacific Bell's response time on customer calls so that it is falling below the response time standard set in G.O. 133-B. Consequently, they contend, the practice violates the disclosure and service standards required by Public Utilities Code §§ 451 and 2896, Tariff Rule 12, and previous Commission decisions, notably our previous decision in the 1986 Pacific Bell marketing abuse case.

The record supports these contentions. The director of Pacific Bell's Consumer Markets Group, Jewell Stoddard, testified that Pacific Bell instructs its representatives to ask each caller, at the beginning of every call, for permission to access the subscriber's proprietary network information so that Pacific Bell can offer Pacific Bell or Pacific Bell Affiliate products on every call. (RT 5, p. 787.) If customer answers "no" to this question, Pacific Bell instructs its representatives to rephrase the CPNI statement. (Id.) If the caller still responds "no" to the CPNI question, Pacific Bell instructs its representatives to proceed to offer Pacific Bell products: "It is expected that the rep will offer Pacific Bell products on every call and in this case [when customer has not given permission to disclose CPNI information to other entities] will not continue to offer Pacific Bell Affiliate products." (Ex. 57, Decl. Of Jewell Stoddard, Attachment G.) On miscellaneous calls, Pacific Bell instructs its representatives to get the caller's permission to access account information before answering the caller's inquiry. (RT 5, p. 791 (Stoddard)).

Pacific Bell representatives try to sell the customer additional products before answering their inquiries. (Ex. 1, Testimony of Michael Shames, Attachments MS-85, MS-94.) In monitoring Pacific Bell Service Center calls, ORA heard calls in which customers called to ask for bill copies, for directories, to change service to a new residence, to change a PIN number on a calling card, or for information about an interexchange carrier, only to be marketed packages and features and/or solicited to change blocking status before their questions were answered. (Ex. 24, Declaration of Kelly Boyd, p.7; Attachment B.)

These practices violate the disclosure and service standards set forth in §§ 451, 2896, and Tariff Rule 12. The disclosure requirements of § 2896 and Tariff Rule 12 rest on the premise that telephone service providers must enable customers to make informed decisions about their service options, by providing the necessary information. Enabling customers to make informed choices means respecting their choices. If a customer calls for information or to resolve a service problem and does not want to hear about blocking options or additional services, the telephone service provider must respect that choice.

As a practical matter, in today's market, most Pacific Bell residential customers do not have the option of obtaining basic local exchange service from another provider. Pacific Bell estimates that it lost no more than 3% of its residential lines to competitors through 1998. (Ex. 5.) This near-monopoly in the residential market imposes a heightened responsibility on Pacific Bell to provide residential customers service of reasonable quality. Forcing customers to listen to unwanted sales pitches when they call for information or service is not customer service of reasonable quality. And as previously stated, charges obtained as a result of misleading sales tactics are unlawful.

Pacific Bell's practice of requiring its representatives to make sales offers on every call and evaluating them on the basis of their success in selling to callers has led to misleading, confusing, or inappropriate high-pressure sales pitches. Representatives are encouraged to promote products and to overcome customers' objections even in instances where customers have been suspended for non-payment. (Ex. 1, Testimony of Michael Shanes, p. 36-38 and Attachment MS-89.) In a document congratulating a team of service representatives for achieving 125% of its target and sharing the team's secrets of success, Pacific Bell commented: "Caller ID - Offer on Every Call - even those in treatment" (i.e. in danger of having service suspended for non-payment). (Ex. 1, Testimony of Michael Shanes, p. 36 and Attachment MS-90.) In an employee feedback exercise conducted for Pacific Bell, employees expressed concern that pressure to sell was leading to unethical sales tactics. One person commented: "How do you sell to a person who is in treatment?" (Attachment MS-95.)¹⁹

These tactics have resulted in customers buying features they do not want or cannot afford:

During the monitoring on April 2, 1998 at Pacific, I heard a new service order call initiated by someone who said she was on a very limited income, was disabled and had two grandchildren living with her. The caller said she had had her service disconnected in the past, but she had no outstanding bills and that she needed to keep her phone bill cost down. She also said she needed Call Waiting for emergencies because of the children. She was qualified for ULTS service during the call, and she asked how much her monthly service would cost. She was told it would cost $5.62 a month. The service representative then went on to attempt to sell this caller a "Basics Plus" Package of custom calling services, including voice mail and Caller ID. The caller was told this would cost 19.95, and the caller asked, "So my service will be $19.95 a month?" The service representative quickly explained how some of the features in the package would work, but the caller voiced confusion. The caller was also sold the Caller ID box for $9.95 plus approximately $8 in shipping and handling costs. At the end of the call, when the service representative gave the caller her "new" telephone number, it was the same number the caller had given at the beginning of the call as a reference phone number. It was apparent to me, as I discussed with a Pacific Bell Regulatory staff person during the monitoring, that this caller had already ordered service and her order had been put on hold. Apparently, the customer had called back to finalize the order, at which time she was then sold additional packaged products and optional features to increase her monthly bill by $23.20, and to apply additional one time charges of approximately $18. (EX. 4, Declaration of Kelly Boyd, pp. 3-4.)

The available evidence of customers accepting services that they do not want or cannot afford is necessarily anecdotal because Pacific Bell does not track complaints of unwanted services or requests for removal of services. Nevertheless, UCAN was able to document instances of customers objecting to unwanted services and requesting their removal. (See Ex. 1, Testimony of Michael Shames, p. 39.)

To make matters worse, customers report that it is much more difficult to cancel a feature than to add one. (Exs.3, 26, 87.) This complaint highlights another way that "Offer On Every Call" negatively impacts consumers: It takes a toll on their time whenever they try to contact customer service, both directly (the time they spend listening to sales pitches) and indirectly (due to the lengthening of response time because each service call is turned into a sales effort). According to data provided by Pacific Bell, the length of time spent on each call increased between January and July of 1998. When ORA monitored calls at a Pacific Bell call center in September 1998, average time spent on each call that day was 13.9 minutes, compared with an average call handle time of over 8 minutes in May 1998. (Ex. 57, Declaration of Kelly Boyd, p. 7 and Attachment C.)²⁰

Pacific Bell argues that it has a constitutional right to offer its products and services to residential customers in California. Pacific Bell may offer information about additional services to its customers when they call, but in doing so, it must respect customers' right to decline to hear about such services. Pacific Bell may not treat its customers as a captive audience and force them to endure unwanted sales pitches in order to obtain the service or information to which they are entitled. These reasonable restrictions on Pacific Bell's commercial speech are necessary to protect consumers. Moreover, Pacific Bell has many avenues to market its products besides incoming customer calls.

In short, Pacific Bell's "Offer on Every Call" strategy and tactics violate the disclosure and service standards of § 2896, Tariff Rule 12, and § 451.

7.2. Sequential Offerings

When offering optional services, Pacific Bell's sales representatives were trained to offer first the Basics Plus Saver Pack with nine custom calling features, Caller ID, and The Message Center at a cost of $32.90/month.²¹ If the customer was not interested in this package, the service representatives were trained to offer the Basics Saver Pack, which included all services except The Message Center, and costs $24.95/month.

Effective September 14, 1998, Pacific Bell changed the name, contents, and price of certain saver packs. The Basics Saver Pack with nine custom calling features became The Works Saver Pack and cost $16.95/month. Pacific Bell also created The Works Plus Saver Pack which included all the services contained in the Works Saver Pack along with The Message Center and cost $24.90/month. (See Hearing Exhibit 57.) The Basics Saver Pack continued at a cost of $14.95/month with four custom calling features or $12.95 with three custom calling features. Subsequent to filing this tariff, Pacific Bell service representatives were instructed to offer The Works or The Works Plus Saver Pack first and, if rejected, to offer The Basics Saver Pack or The Basics Plus Saver Pack.

TIU alleges that service representatives are directed to inform the customer of the availability of individual custom calling services only after all saver packs have been rejected. Pacific Bell states that as of September 1998, only the Basics Saver Pack is offered as a fallback package. TIU provided documents which revealed Pacific Bell's strategy to "offer high, watch them buy, offer low, nowhere to go." TIU also provided evidence that Pacific Bell requires service representatives to offer the packages of services on every call, establishes team and individual sales goals for such packages, and provides service representatives with financial incentives for these sales. TIU concludes that this system results in vital information regarding lower-cost options being withheld from customers.

In response, Pacific Bell states that service representatives are trained (and are reminded with prompts) to advise customers that they may separately purchase services in a saver pack. Pacific Bell states that package offers occur "only" on 50% to 75% of all calls. Pacific Bell contends that it discloses "sufficient information" for customers to make an informed decision, and that it has no obligation to disclose all material facts.

In evaluating the opposing arguments, we recognize that some sort of sequence is inevitable whenever Pacific Bell presents customers with information on the multitude of custom calling services and packages. ²² The sequence that Pacific Bell has chosen and has mandated that service representatives use, however, is the sequence that most encourages sales. This sequence is driven by Pacific Bell's interest in increasing revenue, not by providing the customer complete information on the options available and allowing the customer to make an informed choice. This sequence starts with the highest-priced package and only goes as low as necessary to entice the customer to buy.

In the 1986 Pacific Bell marketing case,²³ the Commission reviewed Pacific Bell's sales strategies. The Commission concluded that Pacific Bell, by means of "an array of activities that have been referred to generically . . . as `package selling,'" was causing customers to believe that local exchange service was part of a package of optional services. (D.86-05-072, 21 CPUC2d 182, 190.) The "array of activities" included the scripts for selling packages of services where the service representatives were instructed to recommend that a customer purchase a "full package" of telephone service which included all available custom calling features. This package increased the monthly price for unlimited local phone service from $8.25 to $31.95. If the customer objected, the script instructed the service representative to recommend a package with one less feature that costs 50 cents less per month. (Exhibit 511, A.85-01-034.) To remedy these "abusive marketing practices," the Commission ordered Pacific Bell to undertake a massive Customer Notification Plan to reach customers, to notify them of the services they currently have, and to afford them an opportunity to have unwanted services removed and obtain refunds.

Pacific Bell's 1986 script which was part of the package selling abuses (1) made service recommendations to customers which reflected Pacific Bell's objective to increase sales, not provide service recommendations to the customer tailored to meet the customer's needs, (2) had fallback positions which attempted to sell as many services as possible to the customer, again without regard to the customer's needs, and (3) did not offer optional services on an individual basis.

At hearing in the current proceeding, complainants introduced one of the 1998 scripts used by Pacific Bell in selling packages of optional services. (See Exhibit 23.) Entitled "Selling to Success with the New Connect Model Contacts!!!" the script has the service representative telling the customer "I'd like to ask you a few questions to help you select your services." The service representative then asks a series of questions about household composition, frequency of use of the phone, and whether the customer ever works at home or telecommutes.

Regardless of whether the customer is a frequent or infrequent user of the phone, the service representative is instructed to "recommend" to the customer "based on what you've told me about how you use the phone" that the customer purchase the Basics Saver Pack.²⁴ The customer's answers to the questions are thus irrelevant to the service representative's recommendation. If the customer refuses to purchase the packages, the Model Contacts direct the service representative to attempt to overcome objections by explaining the benefits of all the included services or, for customers that object to the price, pointing out that the per day price is only 70 cents. In all cases where the customer continues to object, a fallback package of fewer services is offered. Only after the fallback package is rejected is the service representative instructed to attempt to sell individual services.

Comparing the 1986 script to the 1998 script reveals striking similarities. In both cases, the scripts require the service representative to feign an interest in how the customer actually uses the telephone and to make a pre-determined "recommendation" ostensibly based on the customer's information. The recommendation, in both scripts, is one of Pacific Bell's most expensive packages of optional features. Should the customer refuse to purchase the package, both scripts require the service representative to offer a fallback package that has fewer features and is less expensive. If the customer persists in refusing to purchase a package, the 1998 script then allows the service representative to attempt to sell individual services.

The 1998 script then, like the 1986 script, (1) reflects Pacific Bell's objective to make service recommendations to customers to increase sales, not to tailor recommendations to meet the customer's needs, (2) has fallback positions which attempt to sell as many services as possible to the customer, again without regard to the customer's needs, and (3) offers optional services on an individual basis only after all packages had been refused.

We determined that Pacific Bell's 1986 sales strategies violated Tariff Rule 12 because the actions failed to separately quote the prices for each service. As discussed earlier in this decision, Tariff Rule 12 was subsequently modified to clarify that price quotations shall be "separately stated" for each service. A sales strategy which is designed to create the mistaken impression in a customer that a particular service package recommendation is based on the customer's needs, and which results in a quotation of individual services only if the customer persistently refuses the service packages, fails to meet the requirements of current Tariff Rule 12. Customers are not presented with a quotation for optional services and "allowed to designate which optional services they desire," as required by Tariff Rule 12.

While we recognize that Pacific Bell must present the many service and package options to customers in some sort of order, the 1998 script, like the 1986 script, falls far short of the standard set in Tariff Rule 12. That standard, and the more general statement found in § 2896, require Pacific Bell to provide information to customers and guidance based on the customers' needs, not its revenue goals. Customer service does not preclude sales efforts, but does require that sales efforts be consistent with the disclosure standards and informed choice requirements of Tariff Rule 12 and § 2896.

7.3. Incentives and Sales Quotas

Pursuant to agreements with the unions representing Pacific Bell's service representatives, Pacific Bell began paying service representatives monetary rewards for exceeding sales revenue targets in 1998. In the first level of the incentive system, service representatives receive up to $150/month for meeting their sales revenue targets. The second level of the incentive gives each service representative a 25% commission on all sales above the target. There is no upper bound to the amount of the commission: "[t]his plan is not capped." The example from the TIU agreement shows that on the first $1,890 of sales in a given month, a service representative could earn up to $150. On the second $1,890, with a commission of 25%, the service representative could earn $472.50, with no maximum. (See Hearing Exhibit 42.)

UCAN witnesses Patricia Greenan and Janet Spector, both Pacific Bell employees, testified that the implementation of incentives (money and prizes) for customer service employees had resulted in overly aggressive sales efforts: "everybody's so consumed about this - the money, that in a lot of cases ethics are thrown by the wayside." Low-income customers who are signed up for expensive optional services that exceed their ability to pay particularly troubled witness Spector. This witness recalled one customer, whose service was limited to local calls only, who was being charged $100/month for optional services. Both witnesses stated that they have observed an increase in the number of customer calls they receive requesting that optional services be discontinued.

Sales incentives and sales targets or quotas played a significant role in the earlier Pacific Bell marketing abuse case. In the initial 1986 "cease and desist" order, the Commission directed Pacific Bell to stop "cold selling telemarketing activities and [to] discontinue its sales quota program until further order of this Commission." (D.86-05-072, 21 CPUC2d 182, 191.) In 1989, the Commission subsequently granted Pacific Bell a limited waiver of the prohibition against incentive compensation²⁵ for a certain classification of employees, but only after the incentive compensation plan had been reviewed and approved by the Customer Marketing Oversight Committee (Committee) then advising Pacific Bell on its marketing operations. (D.89-02-048, 31 CPUC2d 112 (headnote only).)

The Committee retained The Center for Ethics and Social Policy, Drs. Charles S. McCoy and Fred N. Twining, to evaluate whether the safeguards put into place by Pacific Bell were adequate to restore public trust and prevent a recurrence of the marketing abuses which led to the 1986 "cease and desist' order. In their report to the Committee, McCoy and Twining stated that Pacific Bell's "practices and incentives used in residential marketing have changed from sales quotas, packaged selling and bonus/rewards based on sales volumes to evaluation of individual performance based primarily on customer service."²⁶ Based on this report and other information, the Committee reported to the Commission that Pacific Bell was in compliance with its tariffs, the Commission's general orders, and statutes. Relying on the Committee's report, the Commission lifted its prohibition on cold-selling telemarketing and sales quota programs. (D.90-02-043, 35 CPUC2d 488, 491.)

According to TIU witness Ribeiro, the Pacific Bell sales strategy that emerged following the 1986 decision was focused on customer service and full and accurate disclosure of service information. To demonstrate this, the witness presented a copy of Pacific Bell's 1992 Sales Quota Policy, which prohibits establishing sales quotas for nonsalaried employees and their immediate supervisors. This witness also offered Pacific Bell's 1992 Business Office Sales Policy and Guidelines, which stated that service representatives are to engage in "consultative selling" by responding to verbal cues from the customer and to cues from the customer records in order to make personalized product and service recommendations in all appropriate contacts.

In contrast to the 1992 policies, Pacific Bell's current sales strategies, as reflected in evidentiary record, rely on sales quotas, packaged selling and bonus/rewards based on sales volumes. Pacific Bell documents show that it established an Individual Incentive Plan that provided monetary compensation based on each service representative's sales of specific services. (See, e.g., Attachment A to Exhibit 58.) Pacific Bell also set revenue goals which were broken down into the number of Caller ID and custom calling features each service representative would need to sell each day to reach the overall total. The monthly goals also included numeric targets for Caller ID Complete Blocking removals, which were also broken down to per representative daily goal. (Exhibit 8 to Hearing Exhibit 38.)

Pacific Bell's current reliance on "packaged selling" is well documented, as discussed in the section above (Sequential Offerings). Similarly, the incentive compensation plans discussed previously clearly establish bonus/rewards based on sales volumes.

We find that Pacific Bell has essentially changed course and reinstated certain abusive marketing practices that we enjoined in 1986. The contrast between the 1992 sales policy and the current directions to service representatives well illustrates Pacific Bell's regression. The 1992 policy requires service representatives to engage in consultative selling, which is defined as responding "to verbal cues and cues provided by customer records to make personalized product and service recommendations." In contrast, the current sales strategy requires service representatives to ask questions but regardless of the response to recommend an expensive package of services. Similarly, the 1992 policy requires service representatives to ask customers if they wish to hear about additional products and services, while Pacific Bell's current policy is to offer packages of services on every call irrespective of the customer's interest or the purpose of the customer's call.

In conclusion, Pacific Bell's current incentive compensation programs closely resemble the marketing programs that we found did not comply with statutes, orders, and tariffs, and which led to the prohibition on cold selling telemarketing and sales quotas in D.86-05-072. These current policies are starkly at odds with the policies in place in 1990 when we both lifted those prohibitions and praised Pacific Bell for its "responsiveness and creativity in developing a series of internal safeguards to confront directly the internal problems that fostered these marketing abuses." (D.90-02-043, 35 CPUC2d 488, 491.)

Thus, we find ourselves in a dilemma. We have no desire to insert the Commission in day-to-day management decisions. Nevertheless, the above history shows a disturbing inability or unwillingness among Pacific Bell management to comply with law absent exacting and continuous oversight. We see today essentially the same wrongdoing that we enjoined 14 years ago. The recurrence of these marketing abuses shows that our previous response failed to obtain, on a long-term basis, the level of customer protection we desired.

TIU requests that we order Pacific Bell to immediately cease and desist from offering any individual monetary incentives to service representatives. TIU would allow Pacific Bell to implement such incentive plans but only with Commission authorization. TIU would require that Pacific Bell file an application, and the Commission to hold hearings and issue a decision, demonstrating with "clear and convincing evidence that the incentive plan proposed by Pacific . . . would not be likely to encourage service representatives to engage in unethical or deceptive sales practices." (TIU Post-Hearing Brief at 48.)

Pacific Bell's history and number of customers require that we take steps to ensure that these marketing abuses do not occur a third time. Accordingly, will set out permanent limitations upon Pacific Bell's incentive compensation programs. We do not do so lightly. In this era of increasing competition, it is our general objective to decrease our regulatory function and to let the competitive marketplace winnow out firms that provide inept customer service. At this time, however, Pacific Bell's history and its nearly exclusive role as the provider of residential local exchange service for millions of California households warrants these limitations.

Therefore, we will limit sales-volume-based incentive compensation for service representatives and their direct supervisors to 5% of monthly compensation.²⁷ This applies only to compensation incentives which reward increased sales to customers, and does not extend to incentive compensation keyed to any other factors. One of our objectives in limiting sales volume incentives is to encourage Pacific Bell to re-focus its service representatives on meeting customers' true service needs, rather than increasing sales. We encourage Pacific Bell to develop innovative compensation plans that reward customer satisfaction or other factors that benefit customers. We envision broad policy-level changes in the values and traditions that guide Pacific Bell's service representatives.

The duration of this limitation shall be that which is necessary to achieve our goals. It will take some time for new values to take root, and Pacific Bell has shown a propensity for backsliding after several years of compliance. Thus, we conclude that the minimum duration of the 5 % limitation prohibition on sales-volume-based incentives for service representatives and their direct supervisors shall be 10 calendar years from the effective date of this decision. After that period, if Pacific Bell believes that such incentives are consistent with its new values, then Pacific Bell may file an application seeking Commission authorization to implement an expanded sales-volume-based incentive program as part of a comprehensive incentive program that also rewards customer satisfaction. In such application process, Pacific Bell shall bear the burden of proving that it has instilled within its management a commitment to putting customer service ahead of single-mindedly increasing sales. Ten years is a reasonable period of time for this prohibition because lasting change in values is required at the senior management level to ensure that this does not happen a third time.

Incentive compensation is at the core of many of the violations detailed in this decision. It has a direct effect on the persons with whom customers interact. Thus, this prohibition plays a large role in the remedies of this case. Ensuring that customers will not be subject to service representatives excessively enticed by money and prizes to sell services is an important part of the overall remedy package we adopt in this decision.

7.4. Providing Customer Information

Pacific Bell from time to time hires outside vendors, such as telemarketing organizations, to contact its customers for sales or other reasons. In doing so, Pacific Bell necessarily provides the outside vendors the names and phone numbers of the customers. In some cases, the lists are created for a particular purpose, such as customers with Caller ID Complete Blocking. Pacific Bell also uses its corporate affiliates that are part of the SBC family of companies to answer customer service calls; these affiliates also have access to customer information.

Complainants object to this sharing of information as violating federal and state law regarding customer privacy. Specifically, UCAN states that 47 U.S.C. § 222 requires Pacific Bell to "protect the confidentiality of proprietary information of . . . customers." UCAN also states that customer proprietary information includes "information that relates to the quantity, technical configuration, type, destination, and amount of use . . . that is made available to the carrier by the customer solely by virtue of the carrier-customer relationship." (Hearing Exhibit 4.) UCAN also states that § 2891 prohibits Pacific Bell from providing customer information, including credit or financial information which services the customer purchases, to "any other person or corporation."

The outside vendors, Pacific Bell states, are acting as its agents in performing certain tasks. Pacific Bell states that it does not divulge to outside vendors unlisted numbers or numbers of customers that have asked Pacific Bell not to be contacted by these vendors. Pacific Bell concludes that it is in full compliance with the 1996 Telecommunications Act and the Federal Communications Commission (FCC) regulations, which explicitly address the use of customer information and of sales agents and affiliates in making sales.

Complainants have not alleged that the information disclosed to agents or corporate affiliates was used for any purpose other than marketing Pacific Bell's products, or that the agents or affiliates failed to keep the information secure. Complainants have not responded to Pacific Bell's statements that it is operating in compliance with the FCC's requirements for affiliates and vendors. Under the Total Service Approach adopted by the FCC, the determination of whether a telecommunications corporation may share customer information among its corporate family turns on the scope of the service provided, not the corporate structure.²⁸ Complainants presented no analysis of this requirement.

Complainants next object to Pacific Bell's sharing of information with SBC Operations, Inc. call centers on both "incoming and outgoing" calls. However, complainants do not address the exception to CPNI restrictions for inbound calls found in 47 U.S.C. § 222(d)(3).

While Pacific Bell has made customer information available to other persons or corporations, those persons or corporations, both outside vendors and corporate affiliates, have been under the direction of Pacific Bell and have been conducting Pacific Bell's business. Complainants have not provided us a citation to an FCC order that prohibits such commonplace arrangements. We note also that no complaint has been filed with the FCC regarding this alleged violation of federal law and regulatory policy.

We turn next to California law on privacy of customer information. Section 2891 prohibits all California telephone corporations from making available to "any other person or corporation" various types of customer information, including customer calling patterns and financial information.²⁹ UCAN alleges that Pacific Bell has violated this statute because it has shared such information with its corporate affiliates and unaffiliated vendors. Pacific Bell responded that it has the right to provide such information to its agents for use on Pacific Bell's behalf. Pacific Bell cites no statute or Commission decision for this proposition.

We observe that UCAN has not alleged that the third parties, whether corporate affiliates or not, were conducting business on behalf of any entity other than Pacific Bell. UCAN appears to be objecting to the mere availability of customer information to these third parties, not the use of the information. Similarly, UCAN has not alleged that Pacific Bell was inadequately supervising the third parties, nor has UCAN alleged any security failures by the third parties.

UCAN's reading of § 2891 - that a telephone corporation must obtain customer consent before sharing the information with anyone - would render the corporation powerless because a corporation can only act through natural persons. Under that reading, Pacific Bell, the corporation, would need customer consent in order to share customer information even with its employees, who are "persons" within the meaning of the statute. Such a reading of the statute would also have the effect of prohibiting Pacific Bell from engaging in the commonplace business practice of hiring outside vendors.³⁰

For the reasons stated above, UCAN has not established a claim under 47 U.S.C. § 222. As we do not adopt UCAN's interpretation of § 2891, the facts alleged by UCAN fail to support a claim under that statute.